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90 seconds at 9 am: NZ$ jumps to 81.9 USc after US stocks rally on better than expected jobs growth; NZ$ back to late April levels when commodity prices were 20% higher
Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news the New Zealand dollar is trading up around 1 USc at 81.9 USc in morning trade.
It surged in line with a global rally in risk-sensitive assets such as gold, oil and US stocks after the world's largest economy generated 163,000 jobs in July, which was more than the 100,000 economists had forecast.
The S&P 500, the broadest measure of US stocks, rose 1.9% and oil prices rose 4.9%. Even gold rose 1.2%. See more here at Bloomberg.
The New Zealand dollar is now at levels seen in late April, back when the Reserve Bank warned it may have to cut official interest rates to compensate for the dampening impact of a strong currency on inflation and economic growth.
The Reserve Bank warned then the currency was over-valued. Since then both the currency fell and commodity prices fell 19%, but now the currency has rebounded by commodity prices have not. See our interactive commodities chart here.
Adding to the pressure on the currency, Morgan Stanley and Citigroup have combined to raise US$1.25 billion in NZ$ denominated bonds, the first such issues of bonds in 5 years. See more here from Gareth Vaughan on our site.
This means the currency is even more over valued in fundamental terms than it was when the Reserve Bank warned it was out of line. Commodity prices were around 20% higher back when the Trade Weighted Index was at the same level of about 73.5. See more here in BNZ's currencies report on our site here.
Meanwhile, the eurozone debt crisis continues to simmer. Greece is scheduled to run out of cash on August 20, but is now in talks with its donors to rejig its austerity plan.
Bloomberg reports here they have agreed to an extra 11.5 billion euros in budget cuts.